Fiscal structure of Sri Lanka: Past, present and the future

Monday, 21 November 2011 00:01 - - {{hitsCtrl.values.hits}}

The persistent coexistence of an untenable fiscal mismatch with one of region’s highest consumer tax rates was the critical economic setting under which Sri Lankan Government planned its fiscal year in 2010.

The persistence of high fiscal deficits over the years goes hand-in-hand with high indirect duties, averaging approximately 120 per cent. Since curbing Government expenditure is not an option to control the fiscal mismatch owing to socioeconomic setbacks that accompany it, taxation remains the only viable option for reducing the deficit. However, as mentioned above, the already high rates of taxation means that there is limited scope for using it as an instrument to curb the deficit.